On forward induction in money-burning games
AbstractWe first consider money-burning games studied by Ben-Porath and Dekel . We show that iterative weak dominance and extensive form rationalizability yield the same unique outcome in this class of games. This result suggests that weak dominance captures the forward induction logic implied by extenisve form rationalizability. Next, we consider an example of entry model by Arvan  to demonstrate the power of forward induction. In this example, despite the presence of multiple equilibria, forward induction chooses a unique outcome.
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 19 (2002)
Issue (Month): 3 ()
Note: Received: January 25, 2000; revised version: January 5, 2001
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- Perea,Andrés, 2003. "Rationalizability and Minimal Complexity in Dynamic Games," Research Memoranda 047, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
- Souza, Filipe & Rêgo, Leandro, 2012. "Mixed Equilibrium: When Burning Money is Rational," MPRA Paper 43410, University Library of Munich, Germany.
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